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Small Meat Processors BUSINESS PLANNING GUIDEBOOK

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Small Meat Processors
BUSINESS PLANNING GUIDEBOOK
NMPAN 1
APRIL 2011
AUTHORS
Lauren Gwin
Niche Meat Processor Assistance Network (NMPAN)
Oregon State University
Arion Thiboumery
Niche Meat Processor Assistance Network (NMPAN)
Lorentz Meats
Iowa State University*
Debra Garrison
Agricultural Consultant
Nick McCann
National Center for Appropriate Technology (NCAT)
Appropriate Technology Transfer for Rural Areas
ACKNOWLEDGMENTS
Support for this guide was provided by the U.S. Department
of Agriculture, Rural Development, and eXtension, a national
initiative of the combined land-grant university system. NMPAN is
a small meat processors community of practice within eXtension
www.extension.org
Additional thanks to
• our reviewers for their significant improvements to this guide
• NMPAN’s Advisory Board
В© Niche Meat Processor Assistance Network
This guide may be reproduced in its entirety for informational,
noncommercial purposes. Otherwise, no part of this guide may
be excerpted, reproduced, or utilized in any other form, by any
means: electronic, mechanical, photographic or a recording, nor may
it be stored in a retrieval system (e.g., on a website), transmitted or
otherwise copied for public use without prior written permission from:
Niche Meat Processor Assistance Network
213 Ballard Extension Hall
Oregon State University
Corvallis, OR 97331
This publication may be downloaded online as a free PDF from
www.nichemeatprocessing.org
*publishing university
Table of
CONTENTS
INTRODUCTION.......................................................................................................................................
2
HOW TO USE THIS GUIDE......................................................................................................................
3
5
SECTION 1—Brief Introduction to Business Plan Components......................................
7
SECTION 2—ABC Meats Business Plan, Piece by Piece......................................................
7
Executive Summary...................................................................................................................
Business Description...............................................................................................................
Business Mission and Strategy...............................................................................................
Markets and Competition.........................................................................................................
Marketing Plan.........................................................................................................................
9
10
11
13
16
Financials.................................................................................................................................
17
Appendices...................................................................................................................
Appendix 1......................................................................................................
18
22
Appendix 2......................................................................................................
24
Appendix 3......................................................................................................
24
Appendix 4......................................................................................................
24
Appendix 5......................................................................................................
Appendix 6.......................................................................................................
25
SECTION 3—Considerations for Other Plant Configurations.................................................
27
SECTION 4—Business Planning Assistance/Resources............................................................
36
SECTION 5—A Final Word...................................................................................................................
37
1
INTRODUCTION
INTRODUCTION
This guidebook walks you through creating a business plan for a small
meat processing facility. The example used is a real business plan,
written by an existing small processor to obtain bank financing for a
significant expansion and retooling of his business. Names and other
identifying details have been changed for confidentiality.
What is a business plan?
A business plan is a living document in which you clearly state the goals
of your planned business venture, provide reasons that these goals are
achievable, and outline your plan to achieve your goals.
When does a processor need a business plan?
To put it another way, when do you not need a business plan? Answer:
when you can afford to fail. Unless you’re planning a meat processing
business as a hobby, you need a business plan. Your banker will require
projections of revenue and cash flow with concrete information to back
up these numbers. At a minimum your business plan is for your bank.
But your business plan is also for you.
It can be daunting to put a business plan together. But the process
of planning your business — trying to figure out how it will work and
whether you’re going to make money — is essential. Admittedly, almost
no business runs exactly as a business plan projects. But it is far better
to lose money on paper than to lose money in real life.
What is your plant going to cost? How many employees do you need,
and how much can you afford to pay them? What prices will you charge?
Where will the livestock come from, and how do you know they’re
coming? These are all questions you need to answer before you take
out a $1 to 2 million loan and start paying it back every month for
25 years. Putting together a business plan shows you are serious
about starting or expanding and have thought through the process.
What is not covered in this guide?
This guide does not cover all the different regulations relevant to
building and operating a processing facility. It is critical to understand
the regulations at the federal, state, and local levels before you finalize
your plans. Make sure you understand the pros and cons of different
types of inspection (federal, state, custom-exempt, retail-exempt:
see www.extension.org/pages/Meat_Inspection for definitions and
distinctions) so you select the right one for your business. You will also
need to understand and comply with local, state, and federal regulations
regarding zoning and local planning, water quality, waste management,
environmental health, food safety records and documentation, humane
handling, pest control, product labeling, and others.
2
Small Meat Processors Business Planning Guidebook
HOW TO USE THIS GUIDE
To build or not to build?
Proceed with caution. Meat processing facilities – like many
manufacturing facilities – can be very expensive to build and operate.
Many start-up businesses fail financially in the first few years. Even
when the closest inspected slaughter and/or processing facility seems
too far away, building an entirely new plant, mobile or fixed, may not be
the most cost-effective solution. Livestock producers considering building a meat processing facility may first want to evaluate the options and
costs of pooling livestock for shared transportation to existing inspected
facilities and use less-than-load (LTL) shipping to get the meat back.
Remodeling an existing plant may also be possible; the business plans
in this guide can be adapted to that type of project as well. Still, in some
cases – and more so in the future as older plants complete their useful
lifespan – it will make sense to build a new facility.
HOW TO USE THIS GUIDE
This guide has five sections:
1—Brief introduction to business plan components
2—Business plan, piece by piece, from a real processor, with comments
3—Considerations for other plant configurations
4—Other business planning resources
5—A final word
Section I lists and briefly describes the basic components of a business
plan. Section 2 walks through the business plan for a specific meat
processing business, a custom-exempt slaughter and processing
facility proposing to build a new building three times its current size,
become USDA-inspected, and expand its retail operation. In each part
of this business plan, you will find questions you need to answer and
suggestions for finding information to answer those questions.
The example business plan used in this guide is not presented as a
masterpiece of business plan writing. It is a basic business plan that
worked – the processor was able to convince his banker to make the
loan. This business plan, however, on its own, was not the only reason
the bank chose to make the loan. The processor had a solid track record
with his bank: he was known as a responsible borrower. The banker
was familiar with this kind of business and may have needed less detail
than another banker with less understanding of meat processing. Other
contextual factors may have played a role. Yet you can be sure that if the
processor had not presented his bank with a clear business plan, the
bank would have said no.
A busy small business owner can put together a business plan without
spending money on high-dollar consultants or putting in endless hours
of extra work on the side. Simple and clear are just fine.
3
HOW TO USE THIS GUIDE
If you are planning a completely new business, it will help you to outline
all the steps involved from receiving a live animal to sale of product to
the final customer (e.g., slaughter, fabrication, value-added processing,
packaging, labeling, marketing, sales, and distribution). While your
business may handle only a small portion of that supply chain, it’s a
good idea to understand the full picture so you can see how you fit
and the needs of your supply chain partners.
In Section 3, you will see how your plan may change for two alternative
plant configurations: first as a custom-exempt facility and, second, by
adding an inspected mobile slaughter unit. Section 4 lists other useful
resources for business planning. Section 5 concludes the guide with a
few final thoughts on planning this kind of business.
4
Small Meat Processors Business Planning Guidebook
SECTION 1—BRIEF INTRODUCTION TO BUSINESS PLAN COMPONENTS
SECTION 1—Brief Introduction to Business Plan Components
Funders – whether a bank or an investor – want your business plan
to answer these questions:
• Is the business idea solid?
• Is there a sufficient market for the product or service?
• Are the financial projections realistic, and do they fit the funder’s typical
loan expectations?
• Is key management experienced and capable?
• What competition exists?
• Does the plan clearly describe how funders will get their money back?
Most business plans have the sections listed below. The order in which they
appear is not set in stone. However, you may find it helpful to identify
your target market, your competition, and your strategic goals before you
describe your marketing plan.
Executive Summary: this is a concise (one page at most) overview
of your entire plan.
Business Description: includes a description of the business, products,
and services; company locations and facilities; and management
and labor;
Business Mission and Strategy: includes your mission statement, strategic
goals and objectives, and financing needs, with exit plan if needed;
Markets and Competition: includes industry trends/analysis, competitive
analysis, and SWOT (strengths, weaknesses, opportunities, and threats)
analysis;
Marketing Plan: includes the overall marketing strategy, pricing strategy,
target markets and market segments, promotion and distribution
strategies, and sales projections; and
Financials: includes assumptions and summary of information
Some business planning experts
advise a SWOT analysis for the
business as a whole: there may
be issues beyond markets and
competition that will determine
whether starting or expanding a
processing plant is a good or bad
move. The full-business SWOT can
help you get at that question.
Appendices:
• Financial reports, historic and projected (balance sheet, cash flow,
income statement)
• Management team
• Other information referenced in the plan (e.g., lists of competitors,
• regional data that affects your market)
You may spend months preparing your plan, but lenders or investors
may spend five minutes reviewing it. They will typically look at it in this
5
SECTION 1—BRIEF INTRODUCTION TO BUSINESS PLAN COMPONENTS
order: Executive Summary, Financials, Management, and the
Competitive Analysis; some investors also will want an exit plan
that tells them how they’ll get their money back. Don’t be offended
by this: it is typical. And don’t think that the rest of your plan is not
important. It is. Remember, your business plan is not only for your
bank. It also helps you get your thoughts and vision in order so
you can carry out your plan.
6
Small Meat Processors Business Planning Guidebook
SECTION 2—ABC MEATS BUSINESS PLAN, PIECE BY PIECE
SECTION 2—ABC Meats Business Plan, Piece by Piece
At the time this business plan was written, ABC Meats was a
custom-exempt processing facility providing processing services to
livestock producers and game hunters. The facility also had a small retail
counter. The new proprietor of ABC Meats has worked there for many
years and recently purchased the business with a combination of equity
(he sold his cattle herd) and a bank loan. He now wishes to expand the
retail operation, build a new building three times the size of the existing
one, and become USDA-inspected. He estimates he needs just over
$2 million to do all this. He plans to ask his local bank for a 20-year loan
of $1.6 million. The remaining $400,000 will come from his own equity
and, if possible, from private investors. One advantage of private
investment capital is that it does not require monthly debt service, as
will a bank loan; however, he must make sure that the cost of private
capital does not compare unfavorably with the cost of bank financing.
EQUITY
Money you or others put into
the business as business owners.
SUBORDINATED DEBT
Debt that is formally subordinated
to your bank loan. If you cannot pay
back your bank loan, the bank will
be first in line to take your assets.
For each piece of the following business plan, you will find a statement
of what it should contain, guidance for the section, and what ABC’s
plan says. Side boxes throughout the guide define terms and suggest
how ABC might have improved its plan.
EXECUTIVE SUMMARY
The Executive Summary gives the high points of the plan and
ties everything together in less than one page. It includes a brief
description of the business, both current and proposed; a brief
summary of the market analysis and business opportunity; and
a simple, clear statement of what the business seeks in financing
along with what assets and equity or subordinated debt will be
part of the financial package.
Guidance for this section
This Summary should only include information that is already
in your plan - no new information. Think of this as the five-minute
version. What are the highlights and important points in the plan
that you’d want to tell someone – a lender, an investor, a potential
management employee – if you only had five minutes with that person?
7
SECTION 2—ABC MEATS BUSINESS PLAN, PIECE BY PIECE
WHAT THE ABC MEATS PLAN SAYS
To capitalize on rising interest in local meats, ABC Meats intends
to build a new, federally-inspected, red meat processing facility,
8000 sq. ft., including retail space for specialty meat products.
ABC Meats has been in business for 50 years at the same location and
has traditionally served livestock producers and hunters with custom
slaughter and meat cutting services operating under USDA’s custom
exemption and retail exemption. ABC has developed an award-winning
line of specialty jerky, hams, and small diameter cooked sausages that
are manufactured for custom and retail customers.
According to a recent Businessweek article, consumers are paying
increased attention to the food they eat (December 2009). This has led
to more demand for small-scale inspected meat processors than ever
before (New York Times March, 26, 2010). Locally produced meat
products differ from products sold through national and international
markets because of their local, artisanal flavor, and personal relationships
that a local meat processor can afford to have with customers. Recent
food scares about meat from both domestic and international sources
have increased customer interest in small regional meat processing
businesses. Local meat processors currently operating have an
opportunity to expand their business by creating personal relationships
with their customers and differentiating their products based on local
quality and uniqueness. Of critical importance in any value added local
food market is sufficient infrastructure to meet demand.
ABC Meats intends to capture part of this local market trend by acquiring
federal inspection for slaughter and processing and by expanding its
facility to increase capacity and expand wholesale and retail sales of
specialty meats.
ABC Meats seeks $1.6 million in long-term financing to cover start-up
costs, equipment, building expenses, and working capital for this
expansion. ABC is willing to invest its own capital and use current
operation assets and personal assets as collateral.
8
Small Meat Processors Business Planning Guidebook
CUSTOM EXEMPT
Slaughter facilities may offer
processing services to the
owner of an animal for direct
return to the owner, his or her
employees, and non-paying
guests. Typically ownership
may be divided among up to
four families.
RETAIL EXEMPT
Facilities may sell inspected
meat directly to consumers;
some wholesaling is allowed
of products that require
cooking (e.g., fresh sausage),
up to an annual dollar amount
(roughly $50,000).
SECTION 2—ABC MEATS BUSINESS PLAN, PIECE BY PIECE
BUSINESS DESCRIPTION
This part describes the current business including location(s), type of
facilities, products and services, and key personnel. It also describes
the planned facility and how it will be different and/or expanded from the
current business. If you are starting a new business, use this section to
describe what you are planning and the people and knowledge that will
make your new venture a success.
Guidance for this section
You should know all the following information. You also will want to
include your current throughput (how many head per species per week,
month, or year) and your current number of employees (and how this
number will change with the expansion). Note how ABC Meats’ plan
has various subsections to make it easier to find specific information.
Your funders also may find it useful in this section to read a brief story
of why you decided to develop this specific business venture. This adds
a personal touch to the business plan.
WHAT THE ABC MEATS PLAN SAYS: Business Description
Business Description, Products, and Services
ABC Meats is a small meat processor with more than 50 years of
business experience at the same location. The company has traditionally
served local livestock producers and hunters with custom slaughter and
meat cutting services. It also manufactures an award-winning line
of specialty meats, including jerky, hams, and small diameter cooked
sausages, for custom and retail customers. ABC Meats currently
operates under USDA’s custom exemption and retail exemption.
Company Locations and Facilities
ABC’s current facility is located on Main Street in downtown OurTown.
It is licensed as a custom slaughter and retail exempt meat processing
facility and is 2,000 sq. ft. in size. The planned new facility will be 8,000
sq. ft. and located outside the city limits to provide for greater livestock
handling capacity with fewer disturbances to the local populace. This
expanded capacity will be essential for increasing processing income
through better customer service — for example, a larger cooling space
to accommodate different hang times based on customer preferences.
Management
John Sharp, President: Mr. Sharp is the current owner and president of
ABC Meats. He has more than 25 years in both meat processing and
retail management. His experience includes work with Giant Value and
Tesco, in both meat cutting and management functions.
Jane Edge, Operations Manager: Ms. Edge has been with ABC Meats for
more than five years and is fully versed in company operations. She
has been instrumental in implementing improved record keeping and
production practices.
9
SECTION 2—ABC MEATS BUSINESS PLAN, PIECE BY PIECE
BUSINESS MISSION AND STRATEGY
This part includes the mission statement, strategic goals and objectives
– what you actually hope to accomplish – and financing needs (this last
item is sometimes called the start-up summary, for start-up businesses).
Guidance for this section
Again, you should know all the information in this section. This is
the place for you to state what you want to do. The financial needs
information should be based on good estimates for costs that you
have received from contractors and suppliers. You will need to develop
building designs or blueprints to get good estimates for construction
costs. Many larger contractors will include design drafting as part of
their construction services package.
Goals usually refer to a general direction you want to go, while objectives
usually lay out how you will accomplish the goals.
This section also could include a description of supply chain partners
and a short list of keys to success. If you are approaching private
funders, such as venture capitalists, you will probably need an exit
plan to tell investors how they will get their money back.
WHAT THE ABC MEATS PLAN SAYS: Business Mission and Strategy
Mission Statement
Our goal at ABC Meats is to give you the very best product and
customer service so that we may earn your trust and future business.
Strategic Goals
• Acquire federal inspection for slaughter and processing;
• Expand the retail and wholesale business for specialty jerky, ham,
and sausage products by using networks already developed by the
local “Buy Fresh, Buy Local” Initiative;
• Attract additional ranchers to use our slaughter, custom cut, and wrap
services by making them aware of additional market opportunities from
expanded retail sales; and
• Expand the capabilities of the facility to meet new demand.
Strategic Objectives
• Increase retail sales to $500,000 over 3 years;
• Increase revenue from the custom slaughter business to $1,019,000
through expanded capacity and adding federal inspection over 3 years;
• Repay new bank loans within 20 years.
10
Small Meat Processors Business Planning Guidebook
MISSION STATEMENT
A short statement about what
your company is and what it
does. If you also include a vision
statement, it should convey key
points about the business that
will help guide decisions.
An OBJECTIVE should be SMART:
Specific
Measurable
Achievable
Relevant
Time-bound
A GOAL requires DRIVE:
Directional
Reasonable
Inspiring
Visible
Eventual
CASH FLOW
Money in and out of your
business checkbook, usually
examined on a monthly basis.
Cash flow is calculated before
accounting for depreciation
and revenue taxes (if any);
it is real cash in-hand.
You always want more cash
coming in than going out.
SECTION 2—ABC MEATS BUSINESS PLAN, PIECE BY PIECE
TABLE 1. FINANCING NEEDS (or “EXPANSION COST” or “START-UP SUMMARY”)
START-UP CAPITAL
CAPITAL EXPENDITURES
As an existing business with
some proprietor capital to
invest, ABC Meats has chosen
not to include additional
start-up capital in its financing
needs (see Table 1).
SOURCES OF FUNDS
*Building and Cooler Facility
$1,720,000
Proprietor Investment
$409,160
Sewer and Water
$10,000
Bank Loan
$1,596,640
Site Work Allowance
$200,000
Total Sources of Funds
$2,005,800
Land (4 acres)
$70,000
Cutting Tables
$1,800
Shelving & Racks
$4,000
Total Capital Expenditure
$2,005,800
*ABC Meats had recently purchased a new sausage stuffer and smokehouse, so
did not anticipate a significant equipment investment with the expansion.
MARKETS AND COMPETITION
This is the place for industry trends/analysis, competitive analysis,
and a SWOT analysis (strengths, weaknesses,opportunities, and
threats). It can be tempting to focus this section on “big picture”
market trends, but keep that part short. The competitive analysis is
much more important to your banker and/or investors. They will buzz
right through industry trends and analysis. They want to know who
your competitors are and how you plan to compete against them.
However, start-up capital
is likely to be critical for a
completely new business
because your business will
start with full expenses —
full-time employees, full
mortgage payment — but not
full revenues. Start-up cash
is needed to get you off the
ground. Most new businesses
lose money for a certain period
of time as they build up sufficient
business to achieve positive cash
flow. One of your financial goals
should be to have a positive cash
flow within 6 to 12 months.
Guidance for this section
Who are your competitors? Are other processors near you that
offer similar services? This information often can be collected from
a listing of meat plants in your state that is usually kept by the state
department of agriculture. Many business plans refer to reports by
industry associations or professional research companies. While
helpful, these are usually not necessary. Once you find out who
your competitors are, find out more about how they do business.
Consider visiting their plants and/or websites. Finding information
about a business helps you learn which products and services it
offers and what it charges for those products and services. You can
also learn background information about prospective customers
and suppliers.
Keep in mind that small processors are usually all in the same boat.
While you need to analyze nearby processors as competition for your
business plan, day to day they may well be a source of help when
you’re in a pinch – for example, you run out of casings in the middle
of the day or you need help with your smokehouse for a new product.
Based on the experience of other small processors, it can be better
to look at nearby processors as knowledgeable neighbors rather than
competition. Even so, your funders will want to see how you will
compete for business with them.
11
SECTION 2—ABC MEATS BUSINESS PLAN, PIECE BY PIECE
WHAT THE ABC MEATS PLAN SAYS: Markets and Competition
Sales Trends in the Small Meat Processing Industry
Long a mainstay of rural communities, small meat processing facilities
provide services that are both needed and profitable. This is especially
true in OurState, where there are many independent livestock producers
and a long history of direct sales of bulk “freezer meat” to household
consumers. Consumer awareness of and interest in local and regional
foods has been expanding in recent years. Local meat processing
businesses are uniquely positioned to take advantage of both longpresent demand and emerging market opportunities.
Industry Analysis
Small meat processing businesses exist in a competitive niche that
overlaps several markets. Typical custom meat processors process
animals from livestock producers within the region. Processors
compete with each other on price, speed of service, quality, and
specialty sausage recipes. Also, processors with retail space compete
with local retailers for retail meat business. Processors do not compet
with food retail establishments strictly on price but on product quality
and uniqueness. Lastly, some inspected processors have developed
value added products, sold wholesale to grocers and restaurants.
In the wholesale business, processors must typically compete with
national and regional distributors and processors.
Market Analysis
The regional market for OurTown includes A, B, C, D, and E counties.
According to 2007 agricultural census data, these five counties represent
significant production in hogs, beef cattle, and dairy, as shown in
Appendix 3. Farms with livestock are typically in need of significant
local processing capacity for local marketing of meat products, as well
as cull cattle and hogs. They represent a significant market for custom
meat processing services. Deer hunting is also a popular pastime in
the region. Processors enjoy a highly profitable deer-processing season
during the fall and winter.
In addition to the slaughter and processing business, meat processors
in OurState also have had success with on-site retail markets. As stated
above, the uniqueness, quality, and relationship offered by local meat
processors have proven attractive to consumers. Appendix 4 lists plants
that have successfully expanded their retail operations within the last
five years and are now highly profitable.
Competitive Analysis
Because this region supports a large and vibrant livestock industry,
there are a number of meat processors in the area dedicated to
providing custom slaughter and specialty meat products and services
to the five-county area mentioned above. Within the custom slaughter
segment, all the meat processors listed in Appendix 5 are competitors.
However, within the retail segment, none of these processors currently
provides significant retail capacity with the exception of 123 and XYZ
Lockers. 123 is almost a two hour drive from OurTown and XYZ is almost
a one hour drive from OurTown. Neither are significant competitors in
the retail arena based on distance. They will, however, compete in the
inspected slaughter and processing arena.
12
Small Meat Processors Business Planning Guidebook
Some custom processors
in ABC’s region are open
only for deer season and
deer processing.
SECTION 2—ABC MEATS BUSINESS PLAN, PIECE BY PIECE
TABLE 2. SWOT ANALYSIS
INTERNAL
EXTERNAL
STRENGTHS
High quality specialty meat products that have been
recognized throughout OurState
OPPORTUNITIES
Expanded custom processing and speed of service
High levels of customer service, including flexible hang times that
local competitors do not provide
WEAKNESSES
Limited current wholesale accounts
No customers using slaughter services for resale in retail and
restaurant establishments
Inspected slaughter opens up opportunities for
OurTown and local livestock producers to market meat to retail and
restaurant establishments
THREATS
123 Locker, a federally inspected plant, and XYZ Locker, a state
inspected plant, will be competitors for inspected slaughter and
processing
MARKETING PLAN
Include the overall marketing strategy, pricing strategy, target
markets and market segments, and strategies for both promotion
and distribution.
Guidance for this section
Understanding your customers is essential to your success. You need
to know who they are, where they are, what they want, and what they
can afford. Most importantly, you have to know that there are enough
of them to support your business. Before you begin to research your
target market, it is important to narrow the market definition even more
by identifying the particular market segment you want to reach. That will
give you good information for planning your marketing to reach customers effectively.
A banker or investor will want to see evidence of demand for your
products and services. For example, a strong piece of evidence for the
processing service side of the business would be letters of commitment
from producers stating that they will bring in a certain average number
of livestock over the year (and especially during specified months). To
help get evidence like this, consider working with trade associations,
such as regional or local cattlemen groups, pork producer groups, and
other livestock producer associations or farmer groups. (Remember that
stated demand and actual demand are two different things.) A third-party
analysis of local demand for your products and services also can be
valuable and potentially more persuasive than anecdotal evidence.
Regarding retail sales, a good place to start looking for target market
data (information about people living in your local area and/or region who
would buy what you’re selling) is the U.S. Census Bureau (www.census.
gov) and Sperling’s Best Places (www.bestplaces.net); both are free and
provide detailed demographic information for both cities and counties.
Try not to be overwhelmed by what could quickly be an information overload. Retail sales depend on the number of people who come to your
business, so the number of people who live in your area will naturally
affect this. There is a joke that you can sell anything in New York City’s
Times Square because there are so many people there, the odds are
good that someone walking by will buy the thing, whatever it is.
TARGET MARKET
A set of people, defined by specific characteristics (for example:
their location,
income level, family size),
that you believe are your most
likely potential customers.
MARKET SEGMENT
A subset of the target market,
also defined by specific
characteristics. The universe
of potential customers can
be divided into almost limitless
market segments. But you will
choose only a few segments
to focus on: these are your
target markets.
13
SECTION 2—ABC MEATS BUSINESS PLAN, PIECE BY PIECE
Similarly, it may be an expensive decision to open a retail store far away
from potential customers without first considering how you will attract
customers to your business. While the ABC Meats plan does not go into
great detail in this area, some demographic items to look for are:
• Overall population size – how many people live near your business?
• Household income – this suggests how much money people in your •
• target market may have at their disposal to spend on your product(s)
• and how much they may be able or willing to pay.
• Population age – families with children tend to spend more than other
• people on groceries. Elderly people don’t tend to spend as much on
• groceries. However, these two groups also may buy different types
• of products: families may buy more ground beef while the elderly
• may buy more filets. And while the elderly may not spend as much
• in total, they may have the ability/desire to purchase more expensive
• items.
• Local traffic flows – how many people drive by your business
• location (or proposed location) every day? Your state Department
• of Transportation may have information about this for free.
• What ethnic groups live in your area? If you make a lot of specialty
• Norwegian sausage and there are a lot of people of Norwegian
• descent in your area, that would be a good thing to note in your
• marketing plan. Such people would be good likely customers
• because of the products you make. You would also want to note
• how you might focus your marketing efforts toward this group
• (for this Norwegian example, perhaps through Lutheran church
• newsletters, local Sons of Norway groups, or local ethnic festivals).
You also can often find associations serving people who might be
interested in your local, specialty meat products such as “Buy Fresh
Buy Local” organizations and Community Supported Agriculture
(CSA) groups. Community gardens and/or cooking classes can also
be good sources. The existence of such local groups provides support
for the idea that people in your area are interested in local and specialty
food products.
Regarding wholesale marketing, what retail stores and restaurants
exist in your area that might be good business partners for you? Note
these in your plan, and include letters of support from them if possible.
It would also be good to include retail sales information for these
establishments, as both competitors and as indicators of the types
of food products people are buying in your area, and at what prices.
The data in this section for the sales projection table should match
up with your cash flow projections.
Bottom Line: Don’t get bogged down with this section. Do your best, and
your lenders and/or investors will tell you if they need more information.
14
Small Meat Processors Business Planning Guidebook
ABC Meats claims there is
significant demand for inspected
processing but provides no
data to back it up. A potential
funder might argue that most
customers are satisfied with
custom-exempt processing
(e.g., for on-the-hoof/freezer
meat sales) and would want
more evidence of enough
demand for inspected processing
to sustain the business.
Anecdotal evidence could help.
For example, “ABC has received
dozens of requests for inspected
slaughter and processing
services on a monthly basis,
from producers wishing to
process between 10 and 1000
head per year.”
SECTION 2—ABC MEATS BUSINESS PLAN, PIECE BY PIECE
Compared to other business plans, ABC Meats’ Marketing Plan is
relatively thin on details, but it was acceptable to ABC Meats’ banker.
This is likely because it was an existing business. A start-up looking
for funding would almost certainly have needed to provide more detail.
WHAT THE ABC MEAT PLAN SAYS: Marketing Plan
Overall Strategy: The overall marketing strategy for the next three
years is to continue to grow and improve the slaughter and
processing business, while expanding the retail and wholesale
parts of the business. The planned new facility will be federally
inspected, so the number of prospective customers will be
significantly higher. For an existing business, a monthly log of the
business you have had to turn down because you are too busy is
also strong evidence.
Target Markets and Market Segments: ABC Meats will target qualityconscious consumers looking for specialty meats that are not available
through typical grocery channels. ABC will also target local restaurant
and bar establishments interested in differentiating themselves from
their competition through higher quality food for a reasonable price.
Lastly, ABC will target larger retail grocery establishments where
locally produced specialty products have been growing in popularity.
Pricing Strategy: ABC Meats products and services are currently
priced higher than competitors in the immediate region. This is
because ABC competes not on price, but on flexibility, the quality
of services and products, and the availability of specialty, value added
products. ABC demonstrates flexibility through its willingness to
do different hang times based on customer preferences. This has
attracted customers interested in the superior taste and quality
of beef hung 10 to 14 days. Also, as mentioned above, ABC Meats
has several award winning, further-processed meat products that
keep customers coming back.
AGING BEEF
ABC Meats prefers 10 to 14
days of aging, but this is just
one opinion. The effects of aging
vary. For most people, aging
beef 7 to 10 days will result in
adequate tenderness, desirable
flavor, and only modest meat
weight loss. Aging meat for
longer periods can reduce shelf
life for fresh products.
Promotion Strategy: ABC Meats will promote its products and services
to customers through:
Regular newspaper advertisements focusing on retail products;
Promotional flyers and radio announcements to advertise increased
processing capacity, retail products, and speed of service; and
Direct sales to local and regional restaurants, wholesale, and retail
establishments.
Distribution Strategy: Primary distribution of meat products will
be through the new proposed retail counter and slaughter facility.
Secondary distribution of wholesale specialty meat products will
be through local deliveries.
Slaughter and further fabrication operations will continue to function
as before, with customers bringing animals for slaughter and picking
up finished cuts and further processed meat products. Customers
will have the options of custom-exempt or inspected slaughter,
depending on their needs.
15
SECTION 2—ABC MEATS BUSINESS PLAN, PIECE BY PIECE
Sales Projections: Retail sales will start when the facility is built and fully
stocked. Sales forecasts, presented in Table 2, are based on experiences
of similar retail expansions of meat processors in small towns in other
parts of the state with similar demographics and competition and may
be considered conservative.
TABLE 3. SALES FORECASTS FOR NEW FACILITY
YEAR 1
YEAR 2
YEAR 3
RETAIL
$100,000
$300,000
$500,000
WHOLESALE
$25,000
$35,000
$45,000
SLAUGHTER AND PROCESSING
$861,028
$925,530
$1,019,605
TOTAL
$986,028
$1,260,530
$1,564,605
FINANCIALS
What goes here? Include the assumptions underpinning the cash flow
statements and historical financial statements, both of which are in
the appendices to your plan.
Guidance for this section
Potential investors will closely examine your cash flow and historical
financial statements. In this section, you must explain and defend
every assumption you used to make the cash flow projections as
well as anything in your historical data that could be a red flag. For
example in ABC Meats’ plan, this section’s first paragraph explains
why profitability fell in 2009 and implies that it was not the consequence
of poor management. Think of your assumptions as a summary of
your financial statements that give enough detail to guide the reader
through the statements.
If you are starting a new business, you have to make more assumptions
than an existing business because you have no track record. You will
want to take extra care in explaining your assumptions and backing
them up.
WHAT THE ABC MEAT PLAN SAYS: Financials
The following are the assumptions behind the forward-looking cash flow
statements included in Appendix I. Also, lower profitability in 2009 (see
Appendix II for historical financial statements) is due to (a) one-time cash
expenditures for consulting fees aimed at improving the recordkeeping
and productivity of the business and (b) increases in labor expenditure
to take on expanded business. If not for these costs, profitability would
have increased.
16
Small Meat Processors Business Planning Guidebook
In your version of this table,
include not only the dollar
amounts but the percent
increase from year to year
that they represent. That makes
your projections even clearer
to potential funders.
For example, ABC Meats
estimates that slaughter and
processing revenue will increase
7 percent from year 1 to year
2 and an additional 10 percent
by year 3.
SECTION 2—ABC MEATS BUSINESS PLAN, PIECE BY PIECE
Assumptions
• Sales increases are based on sales figures of similar facilities located
• in similar communities throughout OurState.
• Negative cash flow in the months of April and May are due to the
• seasonal nature of meat processing.
• Principal and interest payments are based on current payments to
• Citizen’s Bank and additional payments for:
$1,596,640 bank note
6.5 percent annual interest rate
240 periods of payment
• Unit variable costs increase proportional to sales, including:
Ingredients
Raw materials
Packaging
• Because a new facility with new equipment is considerably more
• efficient, only 40 percent increases for utilities, wages, and payroll
• expenses are projected. A 50 percent increase in insurance expense
• is assumed for the new facility. Repairs and maintenance will be
• static because equipment and facility are new.
• Officer wages are static; they are flexible depending on the needs
• of the business.
APPENDICES
This is the place to put your full cash flow projections and historical
financial data (income statements from the last two or three years).
Put additional supporting materials into appendices, to keep the main
body of your plan short and to the point. For example, you may list
primary management personnel in the body of the plan, but if you
want to list the rest of your team and their talents, do that in an
appendix. ABC’s plan has six appendices, listed below.
Appendix 1
Appendix 2
Appendix 3
Appendix 4
Appendix 5
Appendix 6
Obtaining financial information
from other processors will help
support your assumptions.
Projected Cash Flow Statements, Years 1, 2, 3
Historical Financial Data
USDA Livestock Inventory Statistics for Six County Area
Six County Area Competitive Landscape
Meat Processor Expansions in the Last Five Years
Management and Employees
The cost and revenue categories included in ABC’s cash flow
projections may need to be adjusted to fit your business, but
these give you a comprehensive start.
This assumption will hold only
for the first several years.
These cash flow tables are available online as templates, with
instructions. Go to www.nichemeatprocessing.org>Tools for
Businesses>Business Planning.
17
18
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$658
$751
$685
$918
$65,892
$4,139
$33
$11,166
$23,096
$0
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
$685
$918
$65,412
$4,122
$33
$11,929
$11,929
$0
Legal and Accounting
Vehicle Expense
Replacement Tools
Telephone
Advertising
Office Expense
Utilities
Insurance Expense
Rent
Travel
Supplies
Other Services
Repairs and Maintenance
TOTAL GENERAL EXPENSE (Cash Out)
Principal Payment
Taxes
CASH AVAILABLE
CASH FORWARD
$109
$204
$0
$109
$204
$90
Property Taxes
Laundry
License
$74
$9,179
$471
$74
$9,196
$471
Dues and Subscriptions
Interest Expense
Contract Labor
$2,724
$22,639
$2,339
$2,724
$22,639
$2,339
Officer Wages
Hourly Wages
Payroll Expense
YEAR 1
$10,908
$1,483
$6,558
$10,949
$1,488
$6,582
$11,929
FEBRUARY
$70,814
$8,333
$2,083
MONTH 2
GENERAL EXPENSES (Cash Out)
Raw Materials
Ingredients
Packaging
$0
JANUARY
$71,079
$8,333
$2,083
ABC Meats
Cash Receipts from Processing
Cash Receipts from Retail
Cash Receipts from Wholesale
Cash Available (Start Up Operating Capital)
MONTH 1
YEAR 1: MONTHLY CASH FLOW
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
$685
$918
$71,834
$4,157
$33
$19,366
$42,462
$1,313
$204
$0
$109
$74
$9,161
$471
$2,724
$22,639
$2,339
$13,962
$1,898
$8,393
$23,096
MARCH
$84,973
$8,333
$2,083
MONTH 3
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
$685
$918
$55,985
$4,175
$33
-$4,297
$38,165
$0
$204
$0
$109
$74
$9,143
$471
$2,724
$22,639
$2,339
$5,604
$762
$3,369
$42,462
APRIL
$45,479
$8,333
$2,083
MONTH 4
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
$685
$918
$54,026
$4,193
$33
-$11,424
$26,740
$0
$204
$0
$109
$74
$9,125
$471
$2,724
$22,639
$2,339
$4,487
$610
$2,697
$38,165
MAY
$36,410
$8,333
$2,083
MONTH 5
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
$685
$918
$70,453
$4,211
$33
$20,644
$47,384
$0
$204
$0
$109
$74
$9,107
$471
$2,724
$22,639
$2,339
$13,954
$1,897
$8,388
$26,740
JUNE
$84,923
$8,333
$2,083
MONTH 6
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
$685
$918
$62,689
$4,229
$33
$1,253
$48,637
$0
$204
$0
$109
$74
$9,089
$471
$2,724
$22,639
$2,339
$9,495
$1,291
$5,708
$47,384
JULY
$57,787
$8,333
$2,083
MONTH 7
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
$685
$918
$66,120
$4,247
$33
$5,777
$54,413
$0
$204
$0
$109
$74
$9,071
$471
$2,724
$22,639
$2,339
$11,480
$1,560
$6,901
$48,637
AUGUST
$65,759
$8,333
$2,083
MONTH 8
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
$685
$918
$73,368
$4,265
$33
$19,909
$74,322
$0
$204
$0
$109
$74
$9,053
$471
$2,724
$22,639
$2,339
$15,664
$2,129
$9,416
$54,413
SEPTEMBER
$87,159
$8,333
$2,083
MONTH 9
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
$685
$918
$72,521
$4,284
$33
$18,082
$92,404
$0
$204
$0
$109
$74
$9,034
$471
$2,724
$22,639
$2,339
YEAR 1
$15,186
$2,064
$9,129
$74,322
OCTOBER
$84,502
$8,333
$2,083
MONTH 10
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
$685
$918
$67,151
$4,302
$33
$6,292
$98,696
$0
$204
$0
$109
$74
$9,016
$471
$2,724
$22,639
$2,339
$12,106
$1,645
$7,277
$92,404
NOVEMBER
$67,361
$8,333
$2,083
MONTH 11
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
$685
$918
$79,749
$4,321
$33
$31,096
$129,791
$0
$204
$0
$109
$74
$8,997
$471
$2,724
$22,639
$2,339
$19,369
$2,633
$11,644
$98,696
DECEMBER
$104,782
$8,333
$2,083
MONTH 12
$3,501
$2,087
$834
$6,713
$5,067
$33,439
$18,764
$3,900
$658
$9,011
$8,224
$11,013
$805,200
$50,644
$393
$129,791
$1,313
$2,453
$90
$1,304
$884
$109,171
$5,650
$32,692
$271,671
$28,073
$143,164
$19,460
$86,065
$861,028
$100,000
$25,000
ANNUAL
APPENDIX 1—Cash Flow Statements Year 1
ABC MEATS: YEAR 1 MONTHLY CASH FLOW
Small Meat Processors Business Planning Guidebook
$14,668
$1,994
$8,818
$2,724
$22,639
$2,339
$471
$74
$8,978
$109
$204
$90
$0
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
$685
$918
$71,654
$4,340
$33
$37,185
$37,185
GENERAL EXPENSES (Cash Out)
Raw Materials
Ingredients
Packaging
Officer Wages
Hourly Wages
Payroll Expense
Contract Labor
Dues and Subscriptions
Interest Expense
Property Taxes
Laundry
License
Legal and Accounting
Vehicle Expense
Replacement Tools
Telephone
Advertising
Office Expense
Utilities
Insurance Expense
Rent
Travel
Supplies
Other Services
Repairs and Maintenance
TOTAL GENERAL EXPENSE (Cash Out)
Principal Payment
Taxes
CASH AVAILABLE
CASH FORWARD
$2,917
$0
Cash Receipts from Wholesale
Cash Available (Beinning Period)
$109
$204
$0
$0
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$658
$751
$685
$918
$72,108
$4,358
$33
$36,393
$73,579
$22,639
$2,339
$471
$74
$8,960
YEAR 2
$14,613
$1,986
$8,785
$2,724
$2,917
$37,185
$84,976
$25,000
FEBRUARY
JANUARY
$85,295
$25,000
MONTH 2
MONTH 1
Cash Receipts from Processing
Cash Receipts from Retail
ABC Meats
YEAR 2: MONTHLY CASH FLOW
$109
$204
$0
$1,313
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
$685
$918
$75,916
$4,377
$33
$43,185
$116,764
$22,639
$2,339
$471
$74
$8,941
$16,439
$2,235
$9,882
$2,724
$2,917
$73,579
$95,594
$25,000
MARCH
MONTH 3
$109
$204
$0
$0
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
$685
$918
$55,085
$4,396
$33
$13,881
$130,645
$22,639
$2,339
$471
$74
$8,922
$5,214
$709
$3,134
$2,724
$2,917
$116,764
$45,479
$25,000
APRIL
MONTH 4
$109
$204
$0
$0
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
$685
$918
$52,102
$4,415
$33
$4,743
$135,387
$22,639
$2,339
$471
$74
$8,902
$3,508
$477
$2,109
$2,724
$2,917
$130,645
$33,376
$25,000
MAY
MONTH 5
$109
$204
$0
$0
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
$685
$918
$74,529
$4,435
$33
$44,459
$179,846
$22,639
$2,339
$471
$74
$8,883
$16,429
$2,233
$9,877
$2,724
$2,917
$135,387
$95,539
$25,000
JUNE
MONTH 6
$109
$204
$0
$0
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
$685
$918
$65,391
$4,454
$33
$23,050
$202,896
$22,639
$2,339
$471
$74
$8,864
$11,180
$1,520
$6,721
$2,724
$2,917
$179,846
$65,011
$25,000
JULY
MONTH 7
$109
$204
$0
$0
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
$685
$918
$66,750
$4,473
$33
$26,288
$229,184
$22,639
$2,339
$471
$74
$8,844
$11,974
$1,628
$7,198
$2,724
$2,917
$202,896
$69,628
$25,000
AUGUST
MONTH 8
$109
$204
$0
$0
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
$685
$918
$72,712
$4,493
$33
$40,328
$269,512
$22,639
$2,339
$471
$74
$8,825
$15,417
$2,096
$9,268
$2,724
$2,917
$229,184
$89,649
$25,000
SEPTEMBER
MONTH 9
$109
$204
$0
$0
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
$685
$918
$71,876
$4,513
$33
$38,412
$307,924
$22,639
$2,339
$471
$74
$8,805
YEAR 2
$14,947
$2,032
$8,985
$2,724
$2,917
$269,512
$86,917
$25,000
OCTOBER
MONTH 10
$109
$204
$0
$0
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
$685
$918
$66,589
$4,532
$33
$26,048
$333,972
$22,639
$2,339
$471
$74
$8,786
$11,915
$1,620
$7,163
$2,724
$2,917
$307,924
$69,286
$25,000
NOVEMBER
MONTH 11
$109
$204
$0
$0
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
$685
$918
$77,173
$4,552
$33
$50,941
$384,913
$22,639
$2,339
$471
$74
$8,766
$18,019
$2,449
$10,832
$2,724
$2,917
$333,972
$104,782
$25,000
DECEMBER
MONTH 12
$1,304
$2,453
$90
$1,313
$3,501
$2,087
$834
$6,713
$5,067
$33,439
$18,764
$3,900
$658
$9,011
$8,224
$11,013
$821,885
$53,340
$393
$384,913
$271,671
$28,073
$5,650
$884
$106,476
$154,321
$20,976
$92,772
$32,692
$35,000
$925,530
$300,000
ANNUAL
APPENDIX 1—Projected Cash Flow Statement Year 2
ABC MEATS: YEAR 2 MONTHLY CASH FLOW
19
20
$16,438
$2,234
$9,882
$2,724
$22,639
$2,339
$471
$74
$8,746
$109
$204
$90
$0
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
$685
$918
$74,495
$4,592
$33
$36,068
$36,068
Other Services
Repairs and Maintenance
TOTAL GENERAL EXPENSE (Cash Out)
Principal Payment
Taxes
CASH AVAILABLE
CASH FORWARD
JANUARY
$94,772
$16,667
$3,750
$0
ABC Meats
Cash Receipts from Processing
Cash Receipts from Retail
Cash Receipts from Wholesale
Cash Available (Beg. Period)
GENERAL EXPENSES (Cash Out)
Raw Materials
Ingredients
Packaging
Officer Wages
Hourly Wages
Payroll Expense
Contract Labor
Dues and Subscriptions
Interest Expense
Property Taxes
Laundry
License
Legal and Accounting
Vehicle Expense
Replacement Tools
Telephone
Advertising
Office Expense
Utilities
Insurance Expense
Rent
Travel
Supplies
MONTH 1
YEAR 3: MONTHLY CASH FLOW
Small Meat Processors Business Planning Guidebook
$685
$918
$74,937
$4,613
$33
$35,252
$71,320
YEAR 3
$16,376
$2,226
$9,845
$2,724
$22,639
$2,339
$471
$74
$8,726
$109
$204
$0
$0
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$658
$751
FEBRUARY
$94,418
$16,667
$3,750
$36,068
MONTH 2
$685
$918
$79,127
$4,633
$33
$42,841
$114,161
$18,422
$2,504
$11,075
$2,724
$22,639
$2,339
$471
$74
$8,705
$109
$204
$0
$1,313
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
MARCH
$106,216
$16,667
$3,750
$71,320
MONTH 3
$685
$918
$54,013
$4,653
$33
$7,196
$121,357
$4,733
$643
$2,845
$2,724
$22,639
$2,339
$471
$74
$8,685
$109
$204
$0
$0
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
APRIL
$45,479
$16,667
$3,750
$114,161
MONTH 4
$685
$918
$51,302
$4,674
$33
-$2,216
$119,142
$3,184
$433
$1,914
$2,724
$22,639
$2,339
$471
$74
$8,665
$109
$204
$0
$0
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
MAY
$33,376
$16,667
$3,750
$121,357
MONTH 5
$685
$918
$77,734
$4,694
$33
$44,110
$163,251
$18,412
$2,503
$11,068
$2,724
$22,639
$2,339
$471
$74
$8,644
$109
$204
$0
$0
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
JUNE
$106,154
$16,667
$3,750
$119,142
MONTH 6
$13,418
$1,824
$8,067
$2,724
$22,639
$2,339
$471
$74
$8,603
$109
$204
$0
$0
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
$751
$685
$918
$69,018
$4,736
$33
$23,994
$207,655
$751
$685
$918
$67,493
$4,715
$33
$20,409
$183,661
AUGUST
$77,364
$16,667
$3,750
$183,661
MONTH 8
$12,529
$1,703
$7,532
$2,724
$22,639
$2,339
$471
$74
$8,624
$109
$204
$0
$0
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
JULY
$72,234
$16,667
$3,750
$163,251
MONTH 7
$751
$685
$918
$75,700
$4,757
$33
$39,537
$247,192
$17,277
$2,348
$10,386
$2,724
$22,639
$2,339
$471
$74
$8,582
$109
$204
$0
$0
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
SEPTEMBER
$99,610
$16,667
$3,750
$207,655
MONTH 9
$751
$685
$918
$74,764
$4,778
$33
$37,416
$284,607
YEAR 3
$16,750
$2,277
$10,070
$2,724
$22,639
$2,339
$471
$74
$8,561
$109
$204
$0
$0
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
OCTOBER
$96,574
$16,667
$3,750
$247,192
MONTH10
$751
$685
$918
$68,841
$4,799
$33
$23,728
$308,335
$13,352
$1,815
$8,027
$2,724
$22,639
$2,339
$471
$74
$8,540
$109
$204
$0
$0
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
NOVEMBER
$76,984
$16,667
$3,750
$284,607
MONTH11
$751
$685
$918
$80,703
$4,820
$33
$51,285
$359,620
$20,193
$2,745
$12,139
$2,724
$22,639
$2,339
$471
$74
$8,519
$109
$204
$0
$0
$292
$174
$70
$559
$422
$2,787
$1,564
$325
$0
DECEMBER
$116,424
$16,667
$3,750
$308,335
MONTH12
$9,011
$8,224
$11,013
$848,127
$56,464
$393
$359,620
$171,084
$23,255
$102,849
$32,692
$271,671
$28,073
$5,650
$884
$103,599
$1,304
$2,453
$90
$1,313
$3,501
$2,087
$834
$6,713
$5,067
$33,439
$18,764
$3,900
$658
$1,019,605
$200,000
$45,000
ANNUAL
APPENDIX 1—Projected Cash Flow Statement Year 3
ABC MEATS: YEAR 3 MONTHLY CASH FLOW
APPENDIX 1—How do I come up with all these numbers?
How do I come up with all these numbers?
While overwhelming at first sight, this process is very do-able, and you
don’t have to be a math geek. Use the revenue, cost of goods (COGs),
and expense categories used by ABC Meats as a starting place, and add
or remove categories as needed. If your plant will be bigger than about
five employees, the following modifications are recommended:
1. With revenue, separate basic processing (slaughter and fabrication),
from further processing (sausage and cured meat production). Put
ground meat production into whichever work area holds the grinder
and does the packaging.
2. The revenue categories for each work area, or “department,” should
also have a corresponding COGs category. You want to be able to track
the money that comes in from each processing area versus the money
that goes out.
3. Make sure that employee wages and associated expenses (taxes and
benefits) are put under COGs in your chart of accounts AND are broken
down according to the departments suggested above. ABC Meats
has wages as an “Expense.” However, if ABC organized revenue and
COGs into departments, it could better track if each department is
maintaining profitability. For example, breaking down into departments
would show you if you’re making all your money from cutting beef and
pork, and losing money on making bologna and curing ham. You will
not see this if you have only one revenue category and one COGs
category for your whole business. You will see whether or not you
are making money, but you will have no idea where it is coming from.
Even if you have fewer than five employees, charting your accounts this
way will allow you to better accommodate departments if/as you grow;
this approach gives you a more realistic sense of “gross profit,” profit
before accounting for overhead costs.
If you have employees who work in more than one department, allocate
their wages on an average percentage basis. For example, your employee Joe Smith works on average, over the year, 50 percent of his time in
cutting and 50 percent of his time making sausages. Count Joe’s wages
50 percent in basic processing and 50 percent in further processing. An
average for the year or every six months is fine, unless that employee’s
duties change significantly. Don’t let precision get in the way of accuracy.
Be sure to work some seasonality into your monthly modeling. Many
plants in the northern parts of the United States run slower in the
months of February through April or May and are really busy in the fall.
Not sure how much revenue to expect? Take your expected volume and
multiply by the prices you hope to charge. If you’re losing money on
paper, rethink your plans. It’s generally better to find more volume than
to raise prices; raising prices tends to make volume go down. Of course,
cutting costs is also an option, but cost cutting reduces what you can
actually do, so be careful not to cut costs too much. Run your numbers
by smart people and tell them to ask hard questions.
Remember, it is much less painful to lose money on paper than in real
life. While no financial model will ever be 100 percent accurate, a model
that is as realistic as possible, and a bit conservative, can help you avoid
big mistakes with real money.
21
APPENDIX 2—HISTORICAL FINANCIAL DATA
ABC MEATS: HISTORICAL FINANCIALS
INCOME STATEMENT 2008 (Accrual Basis)
INCOME STATEMENT 2009 (Accrual Basis)
ORDINARY INCOME/EXPENSE
ORDINARY INCOME/EXPENSE
INCOME
INCOME
Processing Income
464,062.70
Processing Income
538,619.67
Locker Rent Income
36.00
Merchandise Income
2,934.59
Miscellaneous Income
6,123.00
Locker Rent Income
1,182.00
Miscellaneous Income
936.21
TOTAL INCOME
470,221.70
TOTAL INCOME
543,672.47
COST OF GOODS SOLD
COST OF GOODS SOLD
Cost of Merchandise
73,570.51
Cost of Merchandise
86,902.95
Ingredients
9,290.91
Ingredients
12,592.54
Packaging
49,730.40
Packaging
53,920.22
Total COGS
132,591.82
Total COGS
153,415.71
GROSS PROFIT
337,629.88
GROSS PROFIT
390,256.76
EXPENSE
30,076.87
Wages - Officer
32,692.25
Wages
164,742.41
Wages
194,050.95
Payroll Tax Expense
15,682.59
Payroll Tax Expense
20,052.27
Contract Labor
6,615.25
Contract Labor
5,650.00
Dues and Subscriptions
470.00
Dues and Subscriptions
884.00
Depreciation Expense
9,062.00
Interest Expense
6,575.81
Amortization Expense
917.00
Property Taxes
668.00
Education
275.00
Insurance Expense
12,509.77
Interest Expense
5,180.85
Laundry
2,490.82
Property Taxes
530.00
License
89.50
Insurance Expense
14,389.15
Legal and Accounting
1,313.20
Laundry
2,154.31
License
134.50
Office Expense
5,106.35
Legal and Accounting
5,897.00
Repairs and Maintenance
9,629.61
Office Equipment Expense
551.32
Rent Expense
3,600.00
Office Expense
3,269.95
Supplies
9,441.48
Refunds
338.34
Small Tools
2,087.12
Repairs and Maintenance
8,647.01
Advertising and Promotion
6,897.03
Rent Expense
3,300.00
Donations
1,177.00
Supplies
6,163.12
Travel Expense
658.72
Small Tools
704.55
Telephone Expense
838.13
Advertising and Promotion
8,295.26
Utilities
22,691.81
Donations
375.00
Vehicle Expense
3,689.67
Travel Expense
343.02
Bank Service Charges
32.10
Meals and Entertainment
69.29
Postage and Delivery
75.21
Telephone Expense
901.95
Consultant Fees
33,000
Utilities
23,571.72
Miscellaneous Expense
12,303
Vehicle Expense
4,084.74
Bank Service Charges
27.70
Miscellaneous Expense
3,058.98
TOTAL EXPENSE
319,828.88
TOTAL EXPENSE
388,704.35
17,801.00
NET INCOME
1,552.41
NET INCOME
22
EXPENSE
Wages - Officer
Small Meat Processors Business Planning Guidebook
APPENDIX 2—HISTORICAL FINANCIAL DATA
ABC MEATS: HISTORICAL FINANCIALS
BALANCE SHEET 2008
BALANCE SHEET 2009
ASSETS
ASSETS
CURRENT ASSETS
CURRENT ASSETS
Checking/Savings
19,151.31
Checking/Savings
-1,438.70
Accounts Receivable
23,169.80
Accounts Receivable
24,537.53
Other Current Assets
24,779.90
Other Current Assets
24,779.90
TOTAL CURRENT ASSETS
67,101.01
TOTAL CURRENT ASSETS
47,878.73
Fixed Assets
116,918.31
Fixed Assets
127,511.31
Other Assets
14,083.00
Other Assets
14,083.00
TOTAL ASSETS
198,102.32
TOTAL ASSETS
189,473.04
LIABILITIES
LIABILITIES
CURRENT LIABILITIES
CURRENT LIABILITIES
Accounts Payable
Other Current Liabilities
15,932.83
Accounts Payable
8,577.22
43,343.47
Other Current Liabilities
57,479.36
TOTAL CURRENT LIABILITIES
59,276.30
TOTAL CURRENT LIABILITIES
66,056.58
Long Term Liabilities
109,323.02
Long Term Liabilities
92,356.08
TOTAL LIABILITIES
168,599.32
TOTAL LIABILITIES
158,412.66
EQUITY
29,503.00
EQUITY
31,060.38
198,102.32
TOTAL LIABILITIES and EQUITY
189,473.04
TOTAL LIABILITIES and EQUITY
STATEMENT OF CASH FLOW 2008
STATEMENT OF CASH FLOW 2009
OPERATING ACTIVITIES
NET INCOME
OPERATING ACTIVITIES
17,801.00
NET INCOME
-1,557.38
ADJUSTMENTS
to reconcile NET INCOME to NET CASH provided by operations:
ADJUSTMENTS
to reconcile NET INCOME to NET CASH provided by operations:
Accounts Receivable
-23,169.80
Accounts Receivable
-1,367.73
Inventory
-24,779.90
Accounts Payable
-7,355.61
Accounts Payable
14,582.83
Federal/FICA Withholdings
-392.90
Federal/FICA Withholdings
4,209.14
State Income Tax Withholdings
24.33
State Income Tax Withholdings
574.00
FUTA Liability
-115.81
FUTA Liability
238.27
SUTA Liability
416.62
Loan from Officer
8,322.06
Loan from Officer
1,003.65
Notes Payable Citizen's State Bank
30,000.00
Employee Advances
200.00
Note Payable Citizen’s State Bank
13,000.00
NET CASH provided by Operating Activities
6,969.93
NET CASH provided by Operating Activities
27,777.60
INVESTING ACTIVITIES
INVESTING ACTIVITIES
Equipment
-125,980.31
Equipment
-10,593.00
Equipment Accumulated Depreciation
9,062.00
NET CASH provided by Investing Activities
-10,593.00
Covenant Not to Compete
-10,000.00
Goodwill
-5,000.00
Accumulated Amortization
917.00
NET CASH provided by Investing Activities
-131,001.31
FINANCING ACTIVITIES
FINANCING ACTIVITIES
Note Payable Citizen's State Bank
105,442.70
Note Payable Citizen's State Bank
-11,676.62
Note Payable Citizen's State Bank
5,230.32
Note Payable Citizen's State Bank
-5,290.32
Capital Stock
11,702.00
NET CASH provided by Financing Activities
-16,966.94
NET CASH provided by Financing Activities
122,375.02
NET CASH increase for period
-20,590.01
NET CASH increase for period
19,151.31
Cash at beginning of period
19,151.31
CASH AT END OF PERIOD
19,151.31
CASH AT END OF PERIOD
-1,438.70
23
APPENDIX 3—USDA LIVESTOCK INVENTORY STATISTICS FOR FIVE COUNTIES
HOGS
CATTLE and CALVES (incl. dairy)
County A
87,017
55,246
County B
182,309
81,051
County C
219,213
46,892
County D
255,138
61,468
County E
221,401
32,495
APPENDIX 4—SUCCESSFUL MEAT PROCESSOR EXPANSIONS IN THE LAST FIVE YEARS
NAME
CITY
NearTown Meats
NearTown
Jane’s Meat Processing
NearTown
OurTown Smokehouse
OurTown
APPENDIX 5—FIVE-COUNTY AREA COMPETITIVE LANDSCAPE
24
NAME
CITY
COUNTY
TYPE
Joe’s Butcher Shop
OurTown
OurCounty
State Inspected
Jane’s Meat Processing
NearTown
NearCounty
Federally Inspected
Smith Processing & Grocery
NearTown
NearCounty
Custom Exempt
NearTown Meats
NearTown
NearCounty
State Inspected
OurTown Smokehouse
OurTown
OurCounty
Custom Exempt
Small Meat Processors Business Planning Guidebook
APPENDIX 6—MANAGEMENT AND EMPLOYEES
APPENDIX 6: ABC MEATS MANAGEMENT AND EMPLOYEES
John Sharp, President
After managing ABC Meats for five years under previous ownership,
Mr. Sharp purchased the company in February of 2008 and has managed
the company effectively for the past 20 months. Mr. Sharp held positions
with retail and food processing companies for 25 years prior to joining
ABC Meats. He gained valuable retail experience as Manager of Meat,
Seafood, and Deli departments for three years at a Wal-Mart Superstore.
He was instrumental in developing award-winning products for ABC
Meats, working with personnel at OurState University and OurState
Cattle Association. He has successfully managed sales and marketing
responsibilities for major retail and wholesale food service companies.
Mr. Sharp provides the training, leadership, and direction to employees
at ABC Meats and is working with key personnel to develop the
management team to carry the company to greater levels of revenue,
profitability, and prosperity. He is dedicated to meeting and exceeding
customer expectations. His commitment to developing new products
and services is instrumental in attaining the goals he has set for the
company and the employees.
Mr. Sharp will be responsible for compliance with food safety regulations.
Jane Edge, Operations Manager
Ms. Edge has been with ABC Meats for the past five years. She is
a highly motivated manager, who is well versed in all functions of
the company operations. She is responsible for scheduling activity
in the processing department and assists Mr. Sharp with overseeing
cutting operations. Through the years, she has acquired experience
in training, directing, and supervising personnel at ABC Meats. She
is highly motivated and continues to take on additional management
responsibilities.
Ms. Edge understands the importance of maintaining high levels of
efficiency and productivity necessary to meet commitments made
to customers. Through her leadership by example, the staff responsible
to her is successful in meeting the challenges of demands made
by customers for quality products and services and timely delivery
of orders.
Annie Accountant, Bookkeeper (contract)
Ms. Accountant is currently providing bookkeeping services on a
contract basis for ABC Meats. She has worked as a bookkeeper for
the past 10 years with a variety of clients and is highly experienced
in accounting and financial reporting. Working closely with Mr. Gable,
she provides information to all levels of management to assist them
in the management of the company. Annie is prepared to join the
staff of ABC Meats as soon as the facilities are available and the
circumstances permit.
25
APPENDIX 6—MANAGEMENT AND EMPLOYEES
Joseph Jones, Harvest Manager
Mr. Jones is responsible for harvesting animals as they are received from
customers. Mr. Jones’s expertise in harvesting animals allows company
meat cutters to get the most usable product possible from each carcass.
Jim Smith, Bob Ray, and Sandra Dee, Department Lead Personnel
These three individuals are key employees in the cutting and processing
departments and have experience and expertise in their respective
crafts. They are candidates for managerial positions as the company
grows and develops a need for additional managers. Jim has been
with the company for nine years; Sandra five years; and Bob three
years. These key employees are dependable and play a significant role
in providing excellent customer service and ensuring consistent quality.
26
Small Meat Processors Business Planning Guidebook
SECTION 3—CONSIDERATIONS FOR OTHER PLANT CONFIGURATIONS
SECTION 3—Considerations for Other Plant Configurations
Of course, not all processing plants are the same; this section discusses
some thoughts for alternative configurations.
For example, what if you are planning a custom-exempt facility instead
of an inspected one? You probably won’t build the plant any differently,
because you’ll still need to satisfy federal, state, and local building and
sanitation requirements. But you won’t need to allocate staff time to
HACCP compliance, so your labor costs might be lower in your financials.
Your marketing plan will change, because you’ll have a different kind of
customer for your processing services. But custom-exempt processors
can still have retail counters, as long as the meat sold retail comes from
inspected carcasses, so your marketing plan for retail might stay about
the same.
Similarly, what if you aren’t planning a retail space? Just cut out the
parts of your plan and financials that have to do with selling meat: the
extra space, equipment, and staff, and the marketing plan demographics
in relation to retail sales. You’ll still need to convince your banker that
there is enough demand for your slaughter and processing services.
In that sense, you still need a plan to “market” your services to livestock
producer “customers.”
Finally, what if an inspected mobile slaughter unit (MSU) is part of your
plan? MSUs have been around, as custom-exempt operations, for a long
time. Many custom-exempt processors have a truck they drive to a farm
to harvest an animal for the farmer’s household use and carry it back
to a stationary cut and wrap facility. However, USDA- and state-inspected
MSUs are relatively new. The first USDA-inspected MSU began
operations only 10 years ago.
An MSU could be part of a meat processor’s business plan in
various ways:
An existing processor wants to add inspected slaughter capacity
as an MSU, rather than adding or expanding a kill floor in an existing
fixed facility;
A group of livestock producers lacking access to inspected slaughter
builds an MSU and cooperates with an existing inspected cut and
wrap facility to do the processing;
That same group of producers builds and operates both an MSU and
a fixed, cut and wrap facility;
A large ranch builds and operates an MSU and cut and wrap for use
by that ranch only.
27
SECTION 3—CONSIDERATIONS FOR OTHER PLANT CONFIGURATIONS
Business plans that include an MSU are similar, in many ways, to
other processor business plans, with a few modifications. You’ll need
to answer the following questions:
Ownership: Will the MSU be owned and operated by the same entity
or different entities? If different, what will be their formal and fiscal
relationship?
Cut and wrap: Is it possible to cooperate with an existing inspected cut
and wrap facility? If so, what will be the formal and fiscal relationship?
If not, how will the cut and wrap aspect of processing be addressed?
Offal/water disposal: What will be required by the states/counties/local
jurisdictions where the MSU will operate? If the MSU is required to
collect and dispose of the waste water/offal off-site, how and where
will that happen?
Capacity: What is the maximum amount of livestock that can be
processed in a given time based on available inspection hours and
travel time?
The start-up summary, cash flow projections, and profit/loss statements
for a plan including an MSU will be a bit different than those for a fixed
facility, largely due to some differences in necessary equipment.
A sample start-up summary for an MSU – not including the cut and wrap
facility – is in the table below. These figures are based on a real MSU.
Read on for sample MSU cash flow projections, profit/loss statements,
and financial assumptions/explanations.
START-UP SUMMARY FOR A MOBILE SLAUGHTER UNIT
EQUIPMENT
Mobile slaughter unit
$200,000
Tractor truck
$26,000
Cell phone, laptop
$680
Unit equipment
$5000
MATERIALS
Office supplies
$200
Hide tags
$30
USDA stamp
$350
Fees
28
Dept. of Motor Vehicles
$1200
Organic certification (optional)
$350
Business license, permits
$300
Insurance
$1200
TOTAL START UP
$235,310
Small Meat Processors Business Planning Guidebook
$0
$26,063
$249,037
Cash Disbursements
ENDING CASH BALANCE
$270,100
Cash Receipts
-$2,106
$5,000
$23,957
$17,357
$15,251
$26,063
$21,063
NET CASH FLOW
Opening Cash Balance
$0
$17,357
$0
Owner's Draw
$0
$249,037
$0
Investor Dividend Payments
$0
$7,719
$7,719
$0
$0
$0
TOTAL CASH DISBURSEMENTS
$0
$9,638
$231,680
$0
$9,638
Income Tax Payments
Loan Payments
Capital Purchases
Commissions/Returns & Allowances
Operating Expenses
Inventory
CASH DISBURSEMENTS
$15,251
$0
$270,100
$0
Other Cash Receipts
TOTAL CASH RECEIPTS
$0
$0
$5,000
$255,000
Equity Capital Investments
$0
$0
$15,251
$0
$15,251
FEBRUARY
Total Cash from Financing
$0
$250,000
Interest Income
Loan Proceeds
Income from Financing
$15,100
$0
Total Cash from Sales
$15,100
Collections
JANUARY
Cash Sales
Income from Sales
CASH RECEIPTS
CASH FLOW 2011
MOBILE SLAUGHTER UNIT FINANCIALS:
$22,004
$17,357
$15,404
$23,957
-$1,953
$17,357
$0
$0
$0
$7,719
$0
$0
$9,638
$0
$15,404
$0
$0
$0
$0
$0
$15,404
$0
$15,404
MARCH
$20,205
$17,357
$15,558
$22,004
-$1,799
$17,357
$0
$0
$0
$7,719
$0
$0
$9,638
$0
$15,558
$0
$0
$0
$0
$0
$15,558
$0
$15,558
APRIL
$18,561
$17,357
$15,713
$20,205
-$1,644
$17,357
$0
$0
$0
$7,719
$0
$0
$9,638
$0
$15,713
$0
$0
$0
$0
$0
$15,713
$0
$15,713
MAY
$17,075
$17,357
$15,870
$18,561
-$1,487
$17,357
$0
$0
$0
$7,719
$0
$0
$9,638
$0
$15,870
$0
$0
$0
$0
$0
$15,870
$0
$15,870
JUNE
$15,747
$17,357
$16,029
$17,075
-$1,328
$17,357
$0
$0
$0
$7,719
$0
$0
$9,638
$0
$16,029
$0
$0
$0
$0
$0
$16,029
$0
$16,029
JULY
$14,579
$17,357
$16,189
$15,747
-$1,168
$17,357
$0
$0
$0
$7,719
$0
$0
$9,638
$0
$16,189
$0
$0
$0
$0
$0
$16,189
$0
$16,189
AUGUST
$13,574
$17,357
$16,351
$14,579
-$1,006
$17,357
$0
$0
$0
$7,719
$0
$0
$9,638
$0
$16,351
$0
$0
$0
$0
$0
$16,351
$0
$16,351
SEPTEMBER
$12,732
$17,357
$16,515
$13,574
-$842
$17,357
$0
$0
$0
$7,719
$0
$0
$9,638
$0
$16,515
$0
$0
$0
$0
$0
$16,515
$0
$16,515
OCTOBER
$12,055
$17,357
$16,680
$12,732
-$677
$17,357
$0
$0
$0
$7,719
$0
$0
$9,638
$0
$16,680
$0
$0
$0
$0
$0
$16,680
$0
$16,680
NOVEMBER
$11,545
$17,357
$16,847
$12,055
-$510
$17,357
$0
$0
$0
$7,719
$0
$0
$9,638
$0
$16,847
$0
$0
$0
$0
$0
$16,847
$0
$16,847
DECEMBER
$11,545
$6,545
$439,961
$0
$0
$0
$92,631
$231,680
$0
$115,650
$0
$446,506
$0
$255,000
$5,000
$250,000
$0
$191,506
$0
$191,506
TOTAL
SECTION 3—CONSIDERATIONS FOR OTHER PLANT CONFIGURATIONS
MOBILE SLAUGHTER UNIT FINANCIALS: CASH FLOW 2011
29
30
$0
$0
$0
Equity capital investments
Total cash from financing
Other cash receipts
$0
$0
Small Meat Processors Business Planning Guidebook
$0
$17,357
$17,357
$18,715
Cash Disbursements
ENDING CASH BALANCE
$11,031
$17,185
$17,015
$11,203
$19,057
-$172
Cash Receipts
-$342
Opening cash balance
NET CASH FLOW
$17,357
$0
TOTAL CASH DISBURSEMENTS
$17,357
$0
Investor Dividend Payments
Owner's Draw
$0
$0
$0
$7,719
$7,719
Loan Payments
Income Tax Payments
$0
$0
$0
$0
$9,638
Commissions/Returns and Allowances
$9,638
$17,185
$0
$0
$0
$0
$0
$17,185
$0
$17,185
FEBRUARY
Capital Purchases
Operating expenses
Inventory
CASH DISBURSEMENTS
$17,015
$0
Loan proceeds
TOTAL CASH RECEIPTS
$0
Interest income
Income from financing
$17,015
$0
Total cash from sales
$17,015
Cash sales
JANUARY
Collections
Income from sales
CASH RECEIPTS
CASH FLOW 2012
MOBILE SLAUGHTER UNIT FINANCIALS:
$11,032
$17,357
$17,357
$11,031
$0
$17,357
$0
$0
$0
$7,719
$0
$0
$9,638
$0
$17,357
$0
$0
$0
$0
$0
$17,357
$0
$17,357
MARCH
$11,205
$17,357
$17,531
$11,032
$174
$17,357
$0
$0
$0
$7,719
$0
$0
$9,638
$0
$17,531
$0
$0
$0
$0
$0
$17,531
$0
$17,531
APRIL
$11,555
$17,357
$17,706
$11,205
$349
$17,357
$0
$0
$0
$7,719
$0
$0
$9,638
$0
$17,706
$0
$0
$0
$0
$0
$17,706
$0
$17,706
MAY
$12,081
$17,357
$17,883
$11,555
$526
$17,357
$0
$0
$0
$7,719
$0
$0
$9,638
$0
$17,883
$0
$0
$0
$0
$0
$17,883
$0
$17,883
JUNE
$12,786
$17,357
$18,062
$12,081
$705
$17,357
$0
$0
$0
$7,719
$0
$0
$9,638
$0
$18,062
$0
$0
$0
$0
$0
$18,062
$0
$18,062
JULY
$13,671
$17,357
$18,242
$12,786
$886
$17,357
$0
$0
$0
$7,719
$0
$0
$9,638
$0
$18,242
$0
$0
$0
$0
$0
$18,242
$0
$18,242
AUGUST
$14,740
$17,357
$18,425
$13,671
$1,068
$17,357
$0
$0
$0
$7,719
$0
$0
$9,638
$0
$18,425
$0
$0
$0
$0
$0
$18,425
$0
$18,425
SEPTEMBER
$15,992
$17,357
$18,609
$14,740
$1,252
$17,357
$0
$0
$0
$7,719
$0
$0
$9,638
$0
$18,609
$0
$0
$0
$0
$0
$18,609
$0
$18,609
OCTOBER
$17,430
$17,357
$18,795
$15,992
$1,438
$17,357
$0
$0
$0
$7,719
$0
$0
$9,638
$0
$18,795
$0
$0
$0
$0
$0
$18,795
$0
$18,795
NOVEMBER
$19,057
$17,357
$18,983
$17,430
$1,626
$17,357
$0
$0
$0
$7,719
$0
$0
$9,638
$0
$18,983
$0
$0
$0
$0
$0
$18,983
$0
$18,983
DECEMBER
$19,057
$7,512
$208,281
$0
$0
$0
$92,631
$0
$0
$115,650
$0
$215,794
$0
$0
$0
$0
$0
$215,794
$0
$215,794
TOTAL
SECTION 3—CONSIDERATIONS FOR OTHER PLANT CONFIGURATIONS
MOBILE SLAUGHTER UNIT FINANCIALS: CASH FLOW 2012
$0
$0
$0
$58,096
Equity capital investments
Total cash from financing
OTHER CASH RECEIPTS
TOTAL CASH RECEIPTS
$0
$0
Owner's Draw
$19,057
$58,096
$52,070
$25,083
Cash Receipts
Cash Disbursements
ENDING CASH BALANCE
$6,026
Opening Cash Balance
NET CASH FLOW
$52,070
$0
Investor Dividend Payments
TOTAL CASH DISBURSEMENTS
$0
Income Tax Payments
$23,158
Capital Purchases
Loan Payments
$0
$28,913
Commissions/Returns and Allowances
Operating expenses
Inventory
$0
$0
Loan proceeds
CASH DISBURSEMENTS
$0
Interest income
Income from Financing
$58,096
$0
TOTAL CASH FROM SALES
$58,096
Collections
1ST QUARTER
Cash Sales
Income from Sales
CASH RECEIPTS
CASH FLOW 2013 AND 2014
MOBILE SLAUGHTER UNIT FINANCIALS:
$32,869
$52,070
$59,856
$25,083
$7,786
$52,070
$0
$0
$0
$23,158
$0
$0
$28,913
$0
$59,856
$0
$0
$0
$0
$0
$59,856
$0
$59,856
2ND QUARTER
$42,468
$52,070
$61,670
$32,869
$9,600
$52,070
$0
$0
$0
$23,158
$0
$0
$28,913
$0
$61,670
$0
$0
$0
$0
$0
$61,670
$0
$61,670
3RD QUARTER
$53,937
$52,070
$63,539
$42,468
$11,469
$52,070
$0
$0
$0
$23,158
$0
$0
$28,913
$0
$63,539
$0
$0
$0
$0
$0
$63,539
$0
$63,539
4TH QUARTER
$53,937
$34,880
$208,281
$0
$0
$0
$92,631
$0
$0
$115,650
$0
$243,162
$0
$0
$0
$0
$0
$243,162
$0
$243,162
TOTAL
$98,088
$28,913
$73,063
$53,937
$44,151
$28,913
$0
$0
$0
$0
$0
$0
$28,913
$0
$73,063
$0
$0
$0
$0
$0
$73,063
$0
$73,063
1ST QUARTER
$143,946
$28,913
$74,770
$98,088
$45,858
$28,913
$0
$0
$0
$0
$0
$0
$28,913
$0
$74,770
$0
$0
$0
$0
$0
$74,770
$0
$74,770
2ND QUARTER
$191,527
$28,913
$76,494
$143,946
$47,581
$28,913
$0
$0
$0
$0
$0
$0
$28,913
$0
$76,494
$0
$0
$0
$0
$0
$76,494
$0
$76,494
3RD QUARTER
$240,848
$28,913
$78,234
$191,527
$49,321
$28,913
$0
$0
$0
$0
$0
$0
$28,913
$0
$78,234
$0
$0
$0
$0
$0
$78,234
$0
$78,234
4TH QUARTER
$240,848
$186,911
$115,650
$0
$0
$0
$0
$0
$0
$115,650
$0
$302,561
$0
$0
$0
$0
$0
$302,561
$0
$302,561
TOTAL
SECTION 3—CONSIDERATIONS FOR OTHER PLANT CONFIGURATIONS
MOBILE SLAUGHTER UNIT FINANCIALS: CASH FLOW 2013 AND 2014
31
32
$15,100
GROSS PROFIT
Small Meat Processors Business Planning Guidebook
$100
NET PROFIT
$2,234
$745
$2,979
Net income before taxes
Provision for taxes on income
$12,121
$100
TOTAL EXPENSES
$500
DMV
$2,375
$792
$3,167
$12,084
$100
$500
$1,422
$100
$1,458
$1,000
$0
$50
$0
$100
$200
$1,025
$1,000
$0
$50
Gut disposal
Interest on loans
Supplies
Fuel
Postage and shipping
Office supplies
$0
$100
Telephone service
Utilities
$200
$1,025
Insurance
Depreciation
$600
$25
$25
$600
BIT program
Maintenance
$0
$0
Rent
$0
$63
$63
$0
Professional services
Marketing and advertising
$900
$0
$6,000
$15,251
$15,251
FEBRUARY
$900
$0
Employee benefits
Payroll taxes
$6,000
Salaries and wages
EXPENSES General and Administrative
$15,100
JANUARY
Gross Sales
INCOME
INCOME STATEMENT 2011
MOBILE SLAUGHTER UNIT FINANCIALS:
$2,517
$839
$3,356
$12,048
$100
$500
$1,385
$100
$1,000
$0
$50
$0
$100
$200
$1,025
$600
$25
$0
$0
$63
$900
$0
$6,000
$15,404
$15,404
MARCH
APRIL
$2,660
$887
$3,547
$12,011
$100
$500
$1,348
$100
$1,000
$0
$50
$0
$100
$200
$1,025
$600
$25
$0
$0
$63
$900
$0
$6,000
$15,558
$15,558
MAY
$2,805
$935
$3,740
$11,973
$100
$500
$1,311
$100
$1,000
$0
$50
$0
$100
$200
$1,025
$600
$25
$0
$0
$63
$900
$0
$6,000
$15,713
$15,713
JUNE
$2,951
$984
$3,934
$11,936
$100
$500
$1,274
$100
$1,000
$0
$50
$0
$100
$200
$1,025
$600
$25
$0
$0
$63
$900
$0
$6,000
$15,870
$15,870
JULY
$3,098
$1,033
$4,130
$11,898
$100
$500
$1,236
$100
$1,000
$0
$50
$0
$100
$200
$1,025
$600
$25
$0
$0
$63
$900
$0
$6,000
$16,029
$16,029
$3,246
$1,082
$4,329
$11,861
$100
$500
$1,198
$100
$1,000
$0
$50
$0
$100
$200
$1,025
$600
$25
$0
$0
$63
$900
$0
$6,000
$16,189
$16,189
AUGUST
$3,396
$1,132
$4,529
$11,823
$100
$500
$1,160
$100
$1,000
$0
$50
$0
$100
$200
$1,025
$600
$25
$0
$0
$63
$900
$0
$6,000
$16,351
$16,351
SEPTEMBER
$3,548
$1,183
$4,730
$11,784
$100
$500
$1,122
$100
$1,000
$0
$50
$0
$100
$200
$1,025
$600
$25
$0
$0
$63
$900
$0
$6,000
$16,515
$16,515
OCTOBER
$3,700
$1,233
$4,934
$11,746
$100
$500
$1,083
$100
$1,000
$0
$50
$0
$100
$200
$1,025
$600
$25
$0
$0
$63
$900
$0
$6,000
$16,680
$16,680
NOVEMBER
$3,855
$1,285
$5,139
$11,707
$100
$500
$1,045
$100
$1,000
$0
$50
$0
$100
$200
$1,025
$600
$25
$0
$0
$63
$900
$0
$6,000
$16,847
$16,847
DECEMBER
INCOME
$36,385
$12,128
$48,514
$142,992
$1,200
$6,000
$15,042
$1,200
$12,000
$0
$600
$0
$1,200
$2,400
$12,300
$7,200
$300
$0
$0
$750
$10,800
$0
$72,000
$191,506
$191,506
SECTION 3—CONSIDERATIONS FOR OTHER PLANT CONFIGURATIONS
MOBILE SLAUGHTER UNIT FINANCIALS: INCOME STATEMENT 2011
$17,015
GROSS PROFIT
$5,347
$1,337
$4,010
Net income before taxes
Provision for taxes on income
NET PROFIT
$100
$11,668
DMV
TOTAL EXPENSES
$500
$1,006
$100
$1,000
$0
$50
Gut disposal
Interest on loans
Supplies
Fuel
Postage and shipping
Office supplies
$0
$100
Utilities
$200
Depreciation
Telephone service
$600
$1,025
Maintenance
Insurance
$25
$0
Rent
BIT program
$0
$63
Marketing and advertising
Professional services
$900
$0
Employee benefits
Payroll taxes
$6,000
Salaries and wages
EXPENSES General and Administrative
$17,015
JANUARY
Gross Sales
INCOME
INCOME STATEMENT 2012
MOBILE SLAUGHTER UNIT FINANCIALS:
$4,167
$1,389
$5,556
$11,629
$100
$500
$967
$100
$1,000
$0
$50
$0
$100
$200
$1,025
$600
$25
$0
$0
$63
$900
$0
$6,000
$17,185
$17,185
FEBRUARY
$4,326
$1,442
$5,767
$11,590
$100
$500
$927
$100
$1,000
$0
$50
$0
$100
$200
$1,025
$600
$25
$0
$0
$63
$900
$0
$6,000
$17,357
$17,357
MARCH
APRIL
$4,485
$1,495
$5,981
$11,550
$100
$500
$888
$100
$1,000
$0
$50
$0
$100
$200
$1,025
$600
$25
$0
$0
$63
$900
$0
$6,000
$17,531
$17,531
MAY
$4,647
$1,549
$6,196
$11,510
$100
$500
$848
$100
$1,000
$0
$50
$0
$100
$200
$1,025
$600
$25
$0
$0
$63
$900
$0
$6,000
$17,706
$17,706
JUNE
$4,810
$1,603
$6,413
$11,470
$100
$500
$808
$100
$1,000
$0
$50
$0
$100
$200
$1,025
$600
$25
$0
$0
$63
$900
$0
$6,000
$17,883
$17,883
JULY
$4,974
$1,658
$6,632
$11,430
$100
$500
$767
$100
$1,000
$0
$50
$0
$100
$200
$1,025
$600
$25
$0
$0
$63
$900
$0
$6,000
$18,062
$18,062
$5,140
$1,713
$6,853
$11,389
$100
$500
$727
$100
$1,000
$0
$50
$0
$100
$200
$1,025
$600
$25
$0
$0
$63
$900
$0
$6,000
$18,242
$18,242
AUGUST
$5,307
$1,769
$7,076
$11,348
$100
$500
$686
$100
$1,000
$0
$50
$0
$100
$200
$1,025
$600
$25
$0
$0
$63
$900
$0
$6,000
$18,425
$18,425
SEPTEMBER
$5,476
$1,825
$7,302
$11,307
$100
$500
$645
$100
$1,000
$0
$50
$0
$100
$200
$1,025
$600
$25
$0
$0
$63
$900
$0
$6,000
$18,609
$18,609
OCTOBER
$5,647
$1,882
$7,529
$11,266
$100
$500
$604
$100
$1,000
$0
$50
$0
$100
$200
$1,025
$600
$25
$0
$0
$63
$900
$0
$6,000
$18,795
$18,795
NOVEMBER
$5,819
$1,940
$7,759
$11,225
$100
$500
$562
$100
$1,000
$0
$50
$0
$100
$200
$1,025
$600
$25
$0
$0
$63
$900
$0
$6,000
$18,983
$18,983
DECEMBER
TOTAL
$58,808
$19,603
$78,410
$137,383
$1,200
$6,000
$9,433
$1,200
$12,000
$0
$600
$0
$1,200
$2,400
$12,300
$7,200
$300
$0
$0
$750
$10,800
$0
$72,000
$215,794
$215,794
SECTION 3—CONSIDERATIONS FOR OTHER PLANT CONFIGURATIONS
MOBILE SLAUGHTER UNIT FINANCIALS: INCOME STATEMENT 2012
33
34
$58,096
GROSS PROFIT
Small Meat Processors Business Planning Guidebook
$6,168
Provision for taxes on income
$18,505
$24,674
NET PROFIT
$33,422
Net income before taxes
$300
TOTAL EXPENSES
DMV
$1,500
Gut disposal
$300
$20,112
$6,704
$26,816
$33,040
$300
$1,500
$1,053
$300
$1,435
$3,000
$0
$150
$0
$300
$600
$3,075
$3,000
$0
$150
Interest on loans
Supplies
Fuel
Postage and shipping
Office supplies
$0
$300
Telephone service
Utilities
$600
$3,075
Insurance
Depreciation
$1,800
$75
$75
$1,800
BIT program
Maintenance
$0
$0
$0
$0
$188
Marketing and advertising
$188
$2,700
$0
$18,000
$59,856
$59,856
2ND QUARTER
Rent
Professional services
$2,700
$0
Employee benefits
Payroll taxes
$18,000
Salaries and wages
EXPENSES General and Administrative
$58,096
1ST QUARTER
Gross Sales
INCOME
INCOME STATEMENT 2013 AND 2014
MOBILE SLAUGHTER UNIT FINANCIALS:
$21,764
$7,255
$29,019
$32,651
$300
$1,500
$664
$300
$3,000
$0
$150
$0
$300
$600
$3,075
$1,800
$75
$0
$0
$188
$2,700
$0
$18,000
$61,670
$61,670
3RD QUARTER
$23,463
$7,821
$31,284
$32,255
$300
$1,500
$268
$300
$3,000
$0
$150
$0
$300
$600
$3,075
$1,800
$75
$0
$0
$188
$2,700
$0
$18,000
$63,539
$63,539
4TH QUARTER
$83,845
$27,948
$111,793
$131,369
$1,200
$6,000
$3,419
$1,200
$12,000
$0
$600
$0
$1,200
$2,400
$12,300
$7,200
$300
$0
$0
$750
$10,800
$0
$72,000
$243,162
$243,162
TOTAL
$30,807
$10,269
$41,076
$31,988
$300
$1,500
$0
$300
$3,000
$0
$150
$0
$300
$600
$3,075
$1,800
$75
$0
$0
$188
$2,700
$0
$18,000
$73,063
$73,063
1ST QUARTER
$32,087
$10,696
$42,783
$31,988
$300
$1,500
$0
$300
$3,000
$0
$150
$0
$300
$600
$3,075
$1,800
$75
$0
$0
$188
$2,700
$0
$18,000
$74,770
$74,770
2ND QUARTER
$33,380
$11,127
$44,506
$31,988
$300
$1,500
$0
$300
$3,000
$0
$150
$0
$300
$600
$3,075
$1,800
$75
$0
$0
$188
$2,700
$0
$18,000
$76,494
$76,494
3RD QUARTER
$34,685
$11,562
$46,246
$31,988
$300
$1,500
$0
$300
$3,000
$0
$150
$0
$300
$600
$3,075
$1,800
$75
$0
$0
$188
$2,700
$0
$18,000
$78,234
$78,234
4TH QUARTER
$130,958
$43,653
$174,611
$127,950
$1,200
$6,000
$0
$1,200
$12,000
$0
$600
$0
$1,200
$2,400
$12,300
$7,200
$300
$0
$0
$750
$10,800
$0
$72,000
$302,561
$302,561
TOTAL
SECTION 3—CONSIDERATIONS FOR OTHER PLANT CONFIGURATIONS
MOBILE SLAUGHTER UNIT FINANCIALS: INCOME STATEMENT 2013 AND 2014
SECTION 3—CONSIDERATIONS FOR OTHER PLANT CONFIGURATIONS
MOBILE SLAUGHTER UNIT: FINANCIAL ASSUMPTIONS AND EXPLANATIONS
Sales Projections
Unit Volume is based on the number of animals that can be processed
through the unit with two full-time butchers in an eight-hour period,
260 workdays per year.
Capital Purchases
Cost based on current estimates. Truck is used. Miscellaneous
equipment includes saws, cradle, rail rollers and trees, stun gun
and ammo, sanitation equipment, USDA file box, hide tags, first
aid kit, safety equipment, and Hudson sprayers. Laptop and data
logger are for monitoring temperatures for HACCP.
Staff Budget
Based on U.S. Bureau of Labor Statistics employment estimate
and mean wage estimates for this occupation most recently
dated May 2009: www.bls.gov
Industry: Animal Slaughtering and Processing
Hourly mean wage = $12.95
Annual mean wage = $26,930
MSU butchers require a commercial driver’s license, hence the
increase in salary base in these projections
Payroll expense =15%
Professional Services
Only organic certification services have been added to this pro forma.
If the MSU is running as an addition to a cut and wrap facility, legal,
accounting, and other consultants would be included in that facility’s
costs. If a MSU is running as a stand-alone business, these services
would be added.
Capital Investment
Investment capital could come from multiple owners of an MSU or an
individual cut and wrap facility business owner. Equipment financing is
generally easier to obtain then general lines of credit, simply because the
equipment you buy serves as direct collateral for the loan. It’s also less
risky, in that if you are unable to make your payments, you don’t have a
lien against your entire business or your personal real estate: all you lose
is the equipment you bought. The debt-to-equity ratio is an often-used
rule of thumb for lenders; total debt should be no more than three or
four times the equity.
Profit/Loss
Provisions for taxes on income are based on 25 percent.
Cash Flow
The end of the first quarter in the second year a positive cash flow
is possible.
35
SECTION 4—BUSINESS PLANNING ASSISTANCE/RESOURCES
SECTION 4—Business Planning Assistance/Resources
Many business planning guidebooks and courses are available to coach
you through the steps of writing your own plan. An Internet search for
“business planning guide” will kick up more than 100,000 hits. Don’t
spend all your limited business planning time online looking at websites.
But here are a few you might find useful, especially if they lead you to
a real person with business planning expertise and experience who can
review your plan objectively.
Small Business Administration – www.sba.gov
The SBA is a federal agency with local offices around the country.
The people in the office nearest you may or may not know anything
about meat processing, but they can help walk you through the
planning process, and review your plan. Sometimes it helps to have an
experienced business planning professional ask you the right questions.
And SBA has many web-based tools, for example, the “Small Business
Planner”: www.sba.gov/smallbusinessplanner/index.html.
Two SBA-related groups that regularly work with business planning are:
Service Corps of Retired Executives (SCORE) – www.score.org
SCORE is a nonprofit organization funded by SBA to provide
counseling and training to small businesses, for free. SCORE
volunteers are successful, retired businessmen and women. There
are SCORE chapters in every state. Find yours on their website.
Small Business Development Centers (SBDC)
www.sba.gov/aboutsba/sbaprograms/sbdc/index.html
SBDCs are a cooperative effort by the SBA with state and local partners
to support small businesses and their growth. As with most “free” help,
some staffers are better than others. So if one place or person doesn’t
seem like a good fit for you, try another. Some SBDCs may charge a
small fee for certain services or help after a certain number of hours.
Be sure to ask.
Agricultural Marketing Resource Center
www.agmrc.org/business_development/starting_a_business
Keep in mind that many states have business development assistance
offices, and some state agriculture departments have business
development experts on staff.
University Cooperative Extension
The university cooperative extension service in your state may include
expertise in business planning and development. To see if your state has
a similar resource, go to www.extension.org and click on “Local Extension
Offices Near You” near the top of the page. Three examples listed at the
right are:
36
Small Meat Processors Business Planning Guidebook
Pennsylvania State University Extension
Ag Entrepreneurship
extension.psu.edu/farm-business
Cornell University
Northeast Center for Food
Entrepreneurship (see Small Scale
Food Entrepreneurship guidebook)
www.nysaes.cornell.edu/necfe/pubs/booklet.html
University of Nebraska – Lincoln
Food Processing Center
http://fpc.unl.edu
SECTION 5—A FINAL WORD
SECTION 5—A Final Word
This short guide has touched briefly on many topics — from corporate
finance to business development to communications — in relatively
few pages. It was written for a broad audience: processors,
producers, community groups, and others; existing businesses and
start-ups; private corporations, non-profit organizations, and
cooperatives; mobile units and stationary plants. All of these will begin
the business planning process from a somewhat different place, in
different circumstances, and with different experiences and visions.
If you are planning a new or expanded meat processing business, think
through the following questions with site- and situation-specific detail.
This will help you consider if the apparent business opportunity is real
and worth pursuing.
What are the costs of and profit from every activity in the value chain
for meat processing — starting with transport of the live animal to the
facility, through slaughter, hanging, cut and wrap, dry aging, and valueadded production (e.g., sausage/smoking), through to marketing, sales,
and distribution? It is worth noting that some business planning experts
suggest that focusing on overall operating expense and profits rather
than looking at each operation is more relevant to overall profitability,
but the step-by-step analysis can help you identify the more or less
challenging spots in your chain.
What are the unmet needs of everyone in that chain, including the
farmer? Based on those needs, what are the business opportunities?
Even if one part of the chain is inconvenient (by location or cost), it still
may not be a profitable and sustainable business opportunity for farmers
or other entrepreneurs. (And a two-hour drive to processing will almost
always be much more cost-effective than building a new processing
facility.) Even a very small processor needs about 400 head of beef (or
equivalent revenue) per year to stay solvent. You don’t need to have all
400 head lined up the day you break ground, but you must have a clear
plan to get there sooner rather than later (by year two, certainly).
If a legitimate business opportunity really exists, what are the alternative
models of ownership? What liabilities are associated with each? What
are the financial requirements and potential solutions (e.g., debt
vs. equity vs. grants vs. hybrids)?
Nothing can guarantee success. A written business plan is only one
element of a successful business venture. But those who fail to plan,
plan to fail. This guide can help you plan for a successful and robust meat
processing business.
… and justice for all
The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race,
color, national origin, age, disability, and where applicable, sex, marital status, familial status, parental status, religion,
sexual orientation, genetic information, political beliefs, reprisal, or because all or part of an individual’s income is derived
from any public assistance program. (Not all prohibited bases apply to all programs.) Persons with disabilities who require
alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact USDA’s
TARGET Center at 202-720-2600 (voice and TDD). To file a complaint of discrimination, write to USDA, Director, Office of
Civil Rights, 1400 Independence Avenue SW, Washington, DC 20250-9410, or call 800-795-3272 (voice) or 202-720-6382
(TDD). USDA is an equal opportunity provider and employer.
37
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